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Benzinga
Benzinga
Business
Eric McConnell

Could The Data Center Bubble Be About To Pop--Lux Capital Heavyweight Sees Warning Signs

Josh Wolfe Lux Capital Meta
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Data centers have been one of the most pleasant surprises in the real estate sector, generating strong returns for real estate investment trust investors for the last several years. The massive facilities are mission-critical pieces of AI infrastructure, which explains why many of the world's biggest tech companies have multi-billion-dollar data center investments. However, Lux Capital partner Josh Wolfe is concerned that the data center sector is showing signs of a bubble ready to pop.

Data center spending is on pace to exceed $405 billion in 2025, which is a 23% increase over 2024, according to Statista.com. This sector used to be dominated by data center REITs like Equinix (NASDAQ: EQIX) and Digital Realty Trust (NYSE: DLR). However, they now face competition from tech titans like Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and Meta (NASDAQ: META), who would rather own and operate facilities than rent them in perpetuity.

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